James Murdoch was meant to relocate to New York in triumph. Or not even go to New York at all. One suggestion, made in corridors of his father's News Corporation a year or two ago, was that the world's most powerful media group could be run from London. The UK and the US had been conquered by Rupert, but the British capital was nearer new frontiers, across Europe and Asia – where the new News Corporation, satellite broadcaster by satellite broadcaster, would steadily be built.

However, eight years after he first arrived in the country billed as a wunderkind, Murdoch is being forced to leave in a hurry, abandoning the British newspapers that ended up giving him so much trouble. His resignation on Wednesday as chairman of News International – the holding company for the Sun, the Times, and of course the now-closed News of the World – was not in itself unexpected. But it lays bare, in the wake of the phone-hacking and corrupt payments scandal, how far the balance of power has tilted in the empire – away from newspapers, away from London.

James Murdoch may not find it so easy to get away from the British scene, of course. He may not have been in charge of News International when phone hacking took place, but he has been executive chairman since December 2007.

Murdoch has faced plenty of accusations that he did not know enough about what had happened at the News of the World, and has also faced allegations that he presided over a cover-up when the Guardian and others began to reveal what had gone on. In the end he could offer only apologies, saying to a parliamentary committee last November: "What I'm trying to do is learn from the events over the last number of years, try to understand why the company couldn't come to grips with the issues in as fast a way as I would have liked."

Now the 39-year-old has to deal with whatever consequences emerge from the Operation Elveden police investigation into the Sun. It may not be clear when the alleged payments to officials took place, but it cannot have been comfortable to hear Sue Akers, deputy assistant commissioner of the Metropolitan police, saying this week that there was a "culture of illegal payments" at the tabloid at which he has been the ranking executive on the ground for the last four years.

One of the Sun's few responses to that allegation was to note it had tightened up its cash payments system last summer; at some point someone may well ask why that did not happen earlier at a tabloid that paid out £80,000 to just one public sector employee for information.

As Murdoch goes, the new organisation chart maps out the emerging emotional disconnection. Now the man in charge of News International is Tom Mockridge, a New Zealander whose management experience is in satellite television. After the resignation, he no longer reports to a Murdoch, but to the veteran US television executive Chase Carey, who has no known feeling for or interest in newspapers.

Indeed, only on Tuesday this week, Carey told a group of investors in Palm Beach, Florida, that there had been discussions within the company about selling or spinning off its newspaper business in Britain, Australia and the United States.

Speaking the language of Wall Street, not Fleet Street, Carey said on Tuesday that "there certainly is an awareness" that News Corporation would trade at a higher multiple to earnings if the media group did not own newspapers.

It was an extraordinarily frank statement for a senior executive at a company built from a single newspaper in Adelaide, and whose takeover battles have seen some of the world's best-known titles fall into its grasp.

But it would be one that James Murdoch would probably agree with: he has become increasingly eager to leave London since the phone-hacking cataclysm and is hardly enthusiastic about the newspaper business that has brought him so much trouble.

News Corp insiders said on Wednesday that Murdoch was going to take responsibility for "international television" as he settles into the deputy chief operating officer role in New York. Except he was already chairman of BSkyB and the senior executive in charge of other Sky companies around Europe and the Star satellite broadcast business in the United States.

But his closest London advisers – most notably his tiggerish righthand man, Matthew Anderson – are not coming with him, their transfer blocked by the all-powerful New York branch of the corporation. All the younger Murdoch gains from this move is some notional "involvement" in the company's Fox television and film operations in the US, but Fox veterans know how to guard their own territory, and, in any event, they all report to Carey, who is looking less like a chief operating officer to chairman Rupert Murdoch than a de facto chief executive.

On this reading, Rupert Murdoch can have his fun: coming over to lead the Sun's Sunday launch in person, where he gets to study dummy designs, discuss news stories and check on sales at newsagents across the capital. But while this great caper unfolds, the company's management and standards committee continues its serious investigation into the Sun and other London newspapers, reporting to the internal investigator, Joel Klein, in New York; and the executives who get to meddle in the budget discussions are international broadcasters – as opposed to the ink-stained newspaper veterans, whether Les Hinton or Rebekah Brooks.

This isn't how things were meant to pan out.

James Murdoch was barely known in Britain when, suddenly, his father told the Financial Times that he had found a new chief executive to replace Tony Ball at BSkyB. "It will be James," Rupert told colleagues at News Corporation, although James was 30 and BSkyB was a FTSE 100 company, in which News Corp owned just short of 40% of the shares.

A succession process of sorts had to follow, with Rupert on the phone every day to members of the broadcaster's nominations committee, but James was always going to get the job. Later his father boasted that his son's scores in the aptitude tests that formed part of the exercise were "off the charts".

Regardless of the comments about nepotism, his time running Sky turned out to be happy. His pointy-headed first presentation to the City, delivered at blistering speed in sweltering summer heat in 2004, knocked £2bn off Sky's share value. But he laid the path for the firm's next phase of growth, branching out into telecoms and broadband, and reaching into more than 10m homes He had a love of argument and an occasionally fissile temperament, but questions about character were secondary as Sky grew.

The move to News Corp and indeed his eventual takeover looked more and more certain, too, but for a long time James resisted, quipping that it would be many years before he left – although he was forced to move across by his father, in a move that clumsily leaked out in December 2007.

James's caution about joining his father's company turned out to be justifed. Sky was a well-oiled machine; News Corp far more political, where proximity to Rupert was critical. He spent hundreds of millions to build the next Sky in Germany, but no one in London noticed. All that seemed to matter was a newspaper business of modest profitability that he was not obviously cut out to lead, and whose key decisions he could not easily control when the editors of the titles, most notably Brooks, enjoyed a direct relationship with his father. Nevertheless, his dry economic liberalism found an outlet at the 2009 Edinburgh television festival with an attack on the "chilling" BBC and the proposition of a new survivalist credo for media: "The only reliable, durable, and perpetual guarantor of independence is profit."

No one was surprised when the Sun ruthlessly switched from Labour to the Tories during the Labour party conference, the day that Gordon Brown made his pitch to the nation.

The spring following, David Cameron just about made it into Downing Street, with a former News of the World editor, Andy Coulson, beside him. One month later, News Corporation launched a bid for full control of BSkyB, which would have brought the business that James Murdoch best understood into the company fold – and in so doing create the most powerful media group that Britain would have ever seen. It was a bid James Murdoch fought desperately to keep on track, sacrificing the News of the World and its journalists when the hacking storm lifted off.

But none of it was enough. Eight years of patient reputation-building was lost in a few months, as two questions lingered: how much did he know about newspaper dark arts, and when?

As James Murdoch goes to New York, not as his father's successor, but as a weakened company number three, that who-knew-what-when will not easily go away.